MANAGEMENT INFORMATION SYSTEMS 8/E Raymond McLeod, Jr.

and George Schell

Chapter 6
Systems Concepts

Copyright 2001 Prentice-Hall, Inc.

6-1

Four Model Types

1) Physical models
Three dimensional representation such as a scale model

2) Narrative models
Spoken or written

3) Graphic models
Abstraction of lines, symbols, or shapes

4) Mathematical models
Equation(s)
EOQ =
2PS M
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A Graphic Model of the Economic Order Quantity Concept

Cost
Total cost
M anc n inte a ost ec

Purchasing cost 0 EOQ

Order Quantity
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Sales Orders

Customers

Sales Orders

1.
Edit Sales Orders

1.

2.
Enter Sales Order Data

Edit Sales Orders

Edit Sales Orders

Sales Orders

Sales Order Data

Enter Sales Orders

2. 3.

Enter Sales Order Data

Prepare Sales Order Report

Sales Orders

3.
Sales Order History File

Prepare Sales Order Report Sales

Sales Orders Report

Sales Order History File

Order Report Sales Manager

A. A Flowchart

B. A Data Flow Diagram

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Uses of Models
All four models facilitate understanding and communication. The mathematical model also helps predict the future.

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The General Systems Model

Graphic diagram with an accompanying narrative that depicts all organizations in a general way using a systems framework The Physical System
Material flow Personnel flow Machine flow Money flow
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The Physical System of the Firm

Input Resources Transformation Process Output Resources

Boundary of the Firm

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The Conceptual System

Open-loop systems Closed-loop systems (feedback loop) Management control The information processor
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A Closed-Loop System
Feedback

Control Mechanism

Feedback

Input Resources

Transformation Process

Output Resources

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The Physical System of the Firm as a Controlled System

Information Management Information

Input Resources

Transformation Process

Output Resources

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A Sales Report of Fast-Moving Products

Item Number 400293 319421 786402 190796 001007 739792 722210 410615 963214 000123 Item Description Year-to-Date Sales Volume $1,702.93 1,624.00 1,403.97 1,102.00 1,010.79 949.20 946.73 938.40 922.19 919.26 $11,519.47 % of Total Year-to-Date Sales .068 .065 .056 .044 .040 .038 .038 .038 .037 .037 .461
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BRAKE PIPE DOOR HANDLE GASKET CLUTCH DRIVEN PLATE CARPET SNAP SPARK PLUG HOSE CLIP RUBBER PLUG UPPER DOOR HINGE REAR TUBE SHOCK NEEDLE VALVE Totals

Information is Gathered from All of the Physical System Elements

Information

Management

Information

Input Resources

Transformation Process

Output Resources
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Supplier Analysis Report

Item Number: 410615 Item Description: Upper Door Hinge
SUPPLIER NUMBER 3062 4189 0140 2111 NAME
CARTER & SONS PACIFIC MACHINING A.B. MERRIL BAY AREA

LAST DATE 7/12 4/13 1/04 8/19

P.O. # 1048-10 962-10 550-10 1196-10

UNIT DAYS TO QTY. PRICE RECEIPT 360 350 350 360 $8.75 9.10 8.12 11.60 12 08 03 19

PCT. REJECTS .00 .02 .00 .04

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A Job Status Report Provides Information about the Transformation Process

Job Number: 84-182 Customer: Wankel Automotive

Step 4-weld supports to frame Department 410-Welding Date and Time Begun-10/8; 10:15A Projected Job Completion-10/14; 9:30A
NEXT PROCESS

CURRENT STATUS

Step 5-paint frame Department 632-Paint

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The Information Processor Transforms Data into Information

Information

Information

Management

Information Processor

Data

Input Resources

Transformation Process

Output Resources
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Conceptual System (cont.)

Dimensions of Information
Relevancy Accuracy Timeliness Completeness

Too Much Information is called Information Overload

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Conceptual System (cont.)

Standards
Measure of acceptable performance Usually stated in specific terms Used to control physical system Consists of:
Management Information processor Standards
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Objectives
Overall goal that a system is to obtain Systems have one or more objectives

A Comparison of Objectives and Standards

Objectives
Satisfy Customer Needs Produce a return on investment for the owners Operate efficiently Invest in the future Develop sources of supply

Standards of Performance
Achieve an annual sales volume of at least $25 million Maintain a 20% share of the market Maintain an annual growth rate of 15% Pay dividends to stockholders each quarter Maintain the price of the firms common stock above $85 per share Realize an after-tax profit of 15% of sales Maintain a record of accident-free days Keep employee turnover below 10% Invest in a minimum of 15% of sales revenue in research and development Achieve stockout on no more than 2% of the items in inventory during the year Keep the number of backorders to less than 5% of all orders processed Have no plant shutdowns due to unavailable materials Have no legal actions filed against the firm by customers, suppliers, and the government 6-18

Operate ethically

Performance Standards are Made Available to Both Management and the Information Processor
Standards

Information

Information

Management

Information Processor

Data

Input Resources

Transformation Process

Output Resources
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Conceptual System (cont.)

Management by exception
Compares standards with information output of system Manager becomes involved when system falls outside range of acceptable performance Capability provided by CBIS

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Conceptual System (cont.)

Critical Success Factors (CSFs)
A CSF is one of the firms activities that has a strong influence on the firms ability to meet its objectives Firms have multiple CSFs CSFs focuses attention on a portion of a firms activities

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Changes are Made in the Physical System Through the Decision Flow
Standards

Decisions Management

Information Information Processor

Data

Input Resources

Transformation Process

Output Resources
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Conceptual System (cont.)

Decision Flow
Data is transformed into information by the information processor Manager transforms information into decisions

6-23

The General Systems Model of the Firm

Environment

Standards

Decisions
Management

Information
Information Processor

Information and Data

Data Physical Resources

Input Resources
Transformation Process

Output Resources

Physical Resources

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General Systems Model in Context

Helps adjust firm Provides a sense of stability Provides mental picture of what to expect

6-25

Problems -- Good and Bad

Problem solving
Suppress harmful effects Capitalize on opportunity for benefit

Decision
The act of selecting a strategy or action

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Elements of Problem Solving

Desired state Current state Constraints

Difference = Solution Criterion

Internal -- limited resources Environmental -- pressures to restrict resource flows

6-27

Problem

Elements of the Elements of the Problem-Solving Problem-Solving Process Process

Elements of the conceptual system Standards Desired state Current state Information Problem solver (manager) Alternate solutions

Constraints

Solution
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Problems versus Symptoms

Know the difference
Symptoms are produced by the problem The problem causes the symptoms When the problem is corrected the symptoms will cease, but not vice versa

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Problem Structure
Structured
Elements and relationships understood

Unstructured
No elements or relationships understood

Semistructured
Some elements understood

DSS concept of managers and the computer working jointly towards a solution
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Problem Structure

Computer Solve

DSS DSS

Manager Solve

Structured

Semi-structured

Unstructured
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The Systems Approach

John Dewey, 1910 Columbia philosophy professor 1. Recognize the controversy 2. Weigh alternative claims 3. Form a judgment

Problem Problem Solution Solution

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Phases and Steps of the Systems Approach

Phase I: Preparation Effort
Step 1. Step 2. Step 3. View the firm as a system Recognize the environmental system Identify the firms subsystems

Phase II: Definition Effort

Step 4. Step 5. Proceed from a system to a subsystem level Analyze system parts in a certain sequence

Phase III: Solution Effort

Step 6. Step 7. Step 8. Step 9. Step 10. Identify the alternative solutions Evaluate the alternative solutions Select the best solution Implement the solution Follow up to ensure that the solution is effective

Decisions are made at each step of the definition and solution phases

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Preparation Effort
Step 1 Step 2 Step 3 View the firm as a system Recognize environmental system Identify the firms subsystems
Business areas Levels of management Resource flows

Steps taken in any order or at the same time

6-34

The Systems Approach Requires Decision Making

PHASE
Definition Effort

STEP
4. Proceed from a system

DECISION

Solution Effort

Where is the problem? Do new data need to be gathered, or do data to a subsystem level. already exist? 5. Analyze system parts in a How will data be gathered? certain sequence. What is causing the problem? How many alternatives should be identified? 6. Identify alternative Are these alternatives feasible? solutions. Which criteria should be used? How does each alternative measure up to 7. Evaluate the alternative each criterion? solutions. Do all criterion have equal weight? 8. Select the best solution. Is there enough information to make a selection? Which alternative measures up best to the criteria? When should this solution be implemented? 9. Implement the solution. How should the solution be implemented? Who should perform the evaluation? 10. Follow up to ensure that How well is the solution meeting the the solution is effective. objectives? 6-35

Each Functional Area is a Subsystem

President

Marketing Subsystem

Manufacturing Subsystem

Finance Subsystem

Human Resources Subsystem

Information Services Subsystem

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Something Triggers the Definition Effort

The trigger can be: 1. An action 2. The passage of time 3. From within the firm or the environment

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Definition Effort
Step 4: Proceed from System to Subsystem Level
Each level is a system Are subsystems integrated into a smoothly functioning unit? Does the subsystem need to be broken down further?

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Definition Effort [cont.]

Step 5: Analyze System Parts in a Certain Sequence
1. Evaluation standards. They must be valid, realistic, understandable, measurable 2. Compare system outputs with standards 3. Evaluate management 4. Evaluate the information processor 5. Evaluate the inputs and input resources 6. Evaluate the transformation processes 7. Evaluate the output resources

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Each Part of the System Is Analyzed in Sequence

1.
Standards

3.
Management

Information processor

4.

5.
Inputs.

Input resources

Transformation processes

6.

Output resources

7.

2.
Outputs

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Solution Effort
Step 6: Identify alternatives
Find different ways to solve the same problem
Brainstorming Joint Application Design (JAD) session

Step 7: Evaluate alternative solutions Step 8: Select the best solution

Analysis Judgment Bargaining
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Final Steps of the Solution Effort

Step 9: Implement the solution Step 10: Follow-up to ensure that the solution is effective

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An Integrative Model of the Systems Approach

Definition Effort 4. Proceed from a system to a subsystem level 5. Analyze system parts in a certain sequence

Solution Effort 6. Identify alternative solutions 7. Evaluate the alternative solutions 8. Select the best solution 9. Implement the solution 10. Follow-up to ensure solution is effective

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Review of Systems Approach

Integrating each step of the systems approach is a managerial challenge Managerial preparation effort is a good starting point Next, manager engages in functional decomposition
Definition effort

Finally, manager solves problem

Solution effort
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Summary
Models are abstractions of reality
Four types of models General systems model

Physical system Conceptual system Information Processor

Computer Noncomputer
6-45

Summary [cont.]
Management by exception Managerial problem solving Classification of problems
Structured Unstructured

Use of the systems approach

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